1. New Zealand’s rock star economy
A new study examining global economic freedom and competitiveness has New Zealand ranked 3rd after Hong Kong and Singapore.

The new report by the US based Cato Institute takes government, the legal structure, sound money practices, free trade, and regulation into account.

As the world is taking note of our good institutional settings, one might hope it will translate into trade and investment opportunities.

But for that, we would need to open up to FDI – which is one aspect where New Zealand typically does not rank highly.

Australia is the eighth and New Zealand is the third on CATO Institute’s annual index of the world’s freest economies, behind only Hong Kong and Singapore, according to its report. It has documented that “global economic freedom fell slightly in this year’s report, and it remains well below its peak level of 6.92 in 2007.” The average score fell to 6.84 in 2012. In the 2014 list, Hong Kong has the highest rating for economic freedom, with 8.98 out of 10.

2. John Key, superstar
Just as the aforementioned Cato report praises New Zealand’s institutional strength, the London Daily Telegraph praises Prime Minister John Key as “the poor boy who saved New Zealand’s economy”.

Without wishing to downplay Key’s performance, it is a little odd to write an article about Key’s management of the economy without a single mention of Bill English’s contribution as Minister of Finance. Nevertheless, it is interesting to note how a British newspaper assesses our government’s performance.

They almost sound a bit jealous and recommend their own Prime Minister David Cameron might learn a thing or two from his Kiwi counterpart.

Last month, thanks to a tax-cutting programme that has hauled the country out of recession, he swept to a third successive election victory, with personal approval ratings of around 70 per cent. That figure officially makes Mr Key the most popular leader in the Western world. But the 53-year-old ex-banker is no longer just basking in the admiration of his fellow Kiwis. On this side of the world, many British commentators are now backing his radical tax ideas as a blueprint that David Cameron might follow.

The Bank for International Settlements, the central bank of central banks, just issued a fresh warning that the next phase of the Global Financial Crisis (which never really ended) is about to begin.

The global financial markets are dangerously stretched and may unwind with shock force as liquidity dries up, the Bank of International Settlements has warned. Guy Debelle, head of the BIS’s market committee, said investors have become far too complacent, wrongly believing that central banks can protect them, many staking bets that are bound to “blow up” as the first sign of stress.

In a speech in Sydney, Mr Debelle said: “The sell-off, particularly in fixed income, could be relatively violent when it comes. There are a number of investors buying assets on the presumption of a level of liquidity which is not there. This is not evident when positions are being put on, but will become readily apparent when investors attempt to exit their positions. “The exits tend to get jammed unexpectedly and rapidly.”

4. Germany, the new sick man of Europe?
One of those countries that could trigger the next economic crisis is Germany. Though the Germans may have been feeling good about themselves in recent years for not being French, Greek or Italian, their own economy has been moving in the wrong direction under Chancellor Merkel’s leadership.

A rude awakening to the reality of an economy that is hardly growing anymore (if at all) is unavoidable, as an increasing number of German economists warn and the London Daily Telegraphreports.

Growth has averaged 1.1pc since the beginning of the decade, placing Germany 13th out of 18 in the eurozone (or 156th out of 166 countries worldwide over the past 20 years). This chronic weakness been masked by slightly better growth since the Lehman crisis, and by the creditor-debtor dynamics of the EMU debt crisis. German looks healthy only because half of Europe looks deathly.

The Hartz IV reforms – so widely praised as the foundation of German competitiveness, and now being foisted on southern Europe – did not raise productivity, the proper measure of labour reform. Data from the OECD show that German productivity growth slumped to 0.3pc a year in the period from 2007 to 2012, compared with 0.5pc in Denmark, 0.7pc in Austria, 0.9pc in Japan, 1.3pc in Australia, 1.5pc in the US and 3.2pc in Korea. Britain has been negative, of course, but that is no benchmark.

They argue that the curriculum omits key concepts, such as the difference between micro­economics and macro-economics, or between recessions and booms. It also fails to include the great economic thinkers, including the father of economics Adam Smith and his coinage of the term “invisible hand” to describe the forces of the free market.

Part of the problem seems to be the decision to combine economics and business in one curriculum, which Professor Makin and Dr Robson say is unusual internationally. “The curriculum ... as it stands is grossly deficient and needs rewriting,” they say.

“Australia’s curriculum lacks balance and omits core economic principals and essential material across a range of topics. “(The curriculum) is too wordy, is poorly expressed and contains many definitional errors in relation to important economic concepts. Fundamental problems with the existing document suggest that it is beyond redrafting.”

6. Prize-worth economics
Should Australian students ever be taught the names of great economists, they might even hear about Jean Tirole. After all, Tirole was just announced as this year’s recipient of The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel (yes, there is no Economics Nobel Prize because Alfred Nobel forgot to include economics in his list of prize-worthy causes).

As a second-year economics PhD student I took the field sequence in industrial organization. The primary text in the fall course was Jean Tirole’s Theory of Industrial Organization, then just a year old. I found it a difficult book — a detailed overview of the “new,” game-theoretic IO, featuring straightforward explanations and numerous insights and useful observations but shot through with brash, unsubstantiated assumptions and written in an extremely terse, almost smug style that rubbed me the wrong way. After all, game theory was supposed to add transparency and “rigor” to the analysis, bringing to light the hidden assumptions of the old-fashioned, verbal models, but Tirole combined math and ad hoc verbal asides in equal measure. …

As a student I found Tirole’s analysis extremely abstract, with little attention to how these theories might work in practice. Even Tirole’s later book with Jean-Jacques Laffont, A Theory of Incentives in Procurement and Regulation, is not very applied. But evidently Tirole has played a large personal and professional role in training and advising European regulatory bodies, so his work seems to have had a substantial impact on policy.

7. Monopoly is good for you
As Jean Tirole researches the theory of market power, a practioner of market power comes to slightly different conclusion. Peter Thiel’s new book Zero to One makes the case for monopolies, based on a very Schumpeterian idea of entrepreneurship and creative destruction, the Wall Street Journal reports.

Mr. Thiel’s contrarian claim that “monopoly is the condition of every successful business” echoes Joseph Schumpeter, the Austrian economist best known for coining “creative destruction.” Schumpeter explained in a 1942 book the key role of temporary monopolies in innovation: “The introduction of new methods of production and new commodities is hardly conceivable with perfect—and perfectly prompt—competition from the start. And this means that the bulk of what we call economic progress is incompatible with it. As a matter of fact, perfect competition is and always has been temporarily suspended whenever anything new is being introduced.”

Many academics and antitrust lawyers wrongly believe big is bad by definition. The Justice Department pursued IBM in the 1970s and Microsoft in the 1990s without understanding that in a dynamic market, where government doesn’t protect incumbents, new innovators displace old innovators. Apple undermined the dominance of Microsoft, which had ended IBM’s.

Mr. Thiel joins a long-running dispute. Justice Antonin Scalia set off a firestorm a decade ago when he defended monopolies in a majority opinion: “The mere possession of monopoly power, and the concomitant charging of monopoly prices, is not only not unlawful, it is an important element of the free-market system. The opportunity to charge monopoly prices—at least for a short period—is what attracts ‘business acumen’ in the first place; it induces risk taking that produces innovation and economic growth.”

8. Divided economists
It is not just economists and business practitioners disagreeing with each. There is no shortage of disagreement among economists, either.

In the latest IGM poll of leading economists, the panel was asked whether they agreed with Thomas Piketty’s claim that “The most powerful force pushing towards greater wealth inequality in the US since the 1970s is the gap between the after-tax return on capital and the economic growth rate.”

The result: most economists disagree, some strongly so – and a few agree, and even fewer strongly so.

Which probably suggests that it must be an interesting question.

9. The public has no idea about economics either
Okay, so economists disagree on complex questions. That’s bad enough. But what’s even worse about economic literacy is the fact that ordinary people do not even know basic economic facts.

Case in point: The Pew Research Centre’s poll of ordinary Americans on the Federal Budget.

Christopher Ingraham of Wonkblog points out that a new Pew Research Center survey shows that most of the public is ignorant about the distribution of federal spending. Only 20% realize that the federal government spends more money on Social Security than on foreign aid, transportation, and interest on the government debt. Some 33% believe that foreign aid is the biggest item on this list, even though it’s actually the smallest. It accounts for only 1% of the federal budget, compared to a whopping 17% for Social Security, which is one of the biggest federal outlays and has been for decades.

The Pew poll is consistent with numerous previous studies that reach similar results, consistently showing that the public massively overestimates foreign aid spending, and underestimates spending on big entitlement programs, such as Social Security and Medicare. British voters are misinformed about their own government’s budget in much the same way.

Well, had a Kiwi living in Berlin posted a receipt to his New Zealand friends back home, they would also wonder why in Germany you can buy chocolate pudding for $0.31, a loaf of specialty bread for $1.85 and half a dozen organic eggs $2.24.

So the German economy may be in crisis, and New Zealand has a rock star economy, but German consumers still get better value for their money. It probably takes a few economists to explain all of that.

Five days ago, a young Israeli posted a grocery shopping receipt on Facebook: It included everyday items like orange juice, eggs, bread, pasta and three cups of chocolate pudding with whipped cream on top that people in Israel have nicknamed “Milky” and costs just 19 cents. The 25-year-old challenged his readers: “Find any supermarket in Israel where you can get all of these things for less.” He had filled his grocery bag in Berlin, which is regarded as one of Europe’s most affordable capital cities. “See you there!” he wrote.

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

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The Cato Institute is an American libertarian think tank headquartered in Washington, D.C. It was founded as the Charles Koch Foundation in 1974.

Mission: To increase the understanding of public policies based on the principles of limited government, free markets, individual liberty, and peace."

Wow, a right-wing think tank (tea-party) which aims to reduce coporate tax and 'limit government' releases 'findings' praising NZs current tax regime. I am 100% sure there are no vested interest in these 'findings', and am also 100% sure low coporate tax and no regulations are in the best interest of all regular New Zealanders...

Pre Reagan, Thatcher, Rogernomics all products that we purchased were expensive because of "middle-men"

The importers got their cut. Then the warehousing and distribution people got their cut and finaly the retailer got their cut.

After Rogernomics the middle-men were cut out. Places like "The Warehouse" did their own importing, distributing and retailing. Cutting out all the middle-men.

Cutting out the middle-men displeased our Free-market rulers so they moved them into the Government and Councils.

We now have heaps of middle-men creaming us on government and council services.

I pay the Council to collect my rubbish and the Coucil gives the job to the middle-men who take their profitable cut. Instead of just paying wages to collect this rubbish we now have to pay wages plus CEO salaries and company profits.

Now we cannot afford our rates and get very little for our taxes because the middle-men are milking us.

Yes Mike B those are the anti-evolutionary processes of government and centralisation.

As things become more organised they get more efficient - but the process itself carries overheads (middlemen) the more that the middlemen have to be paid, and the higher they have to pull off for oversight and insurance and costs then the less effective their input is - and it doesn't take much to make things inefficient especially in smaller projects.

That is one reason the government can never do a Keynesian coup and tax itself to profitability. the actual effort of improving the tax system tends to increase overheads and decrease productive output, the more the system is evened out and more that is paid out, the larger the leakage becomes. In electronics we see this in transformer and silicon doped gates, short of magic there is no way to beat the themodynamic unity. a monopoly will start more efficienty, but it's own efficiency will result in funds that would have been extracted elsewhere being directly extracted from the monopoly, just like a cat sucked onto the bonnet of a warm car.

Maybe they are right.
Maybe Lee Kwan Yew knew a thing or two and Jonkey is just a mirage .
Is turning a burden of under $15bn into one of $70bn+ a measure of success?
At least Singapre pay for everything when the bill comes in rather than putting it on tick and selling of the family silver.

Depends on how you define freedom
Freedom for who?
Suprising NZ is listed 3rd after HK and Singapore
Both of whom have a 15% property tax on outsiders
Which helps protect and pay for the freedoms of insiders

Well, you could have a look at the report itself, which no doubt contains explanations of what the authors mean by "freedom" and how they measure it. In this case I would imagine that the nanny-statism that you refer to in Singapore is more to do with social than with economic freedom

It's also not unusal for report writers to consider the nanny state a good thing, after all not having to worry about certain things is "Freedom" isn't it?? That's the problem when people start equating "freedom" with "ease", and start losing their freedoms.

#2 They almost sound a bit jealous and recommend their own Prime Minister David Cameron might learn a thing or two from his Kiwi counterpart.
Wouldn't the David be better off learning from the Hong Kong and Singapore, both of which surpassed New Zealand?

I am curious who wrote the gush piece on Jk and then sent it to the paper. I doubt they know much about JK and care little about what we do on the other side of the world. Do we expect it to be a well researched article?

Citigroup are deluded, though interesting they say so little about how the old high price stagnates things, but when it drops it will be stimulating, the other side of the coin. Problems are many and severe with an oil price drop.
regards

So many negative comments here ... is that mainly because Oliver is from Germany? Pity he is not from economic lighthouse Bangladesh, like the other guest expert on everything eco-comical around here.

Anyways ... I feel that repeating what everyone else is saying does not shed much new light on the situation. What does e.g. NZ's status as a free economy mean, when around the world market economics is being replaced by central planning thru reserve banks and NZ is massively benefitting from all the printed money?

Where would NZ be today, had market forces been allowed to do their job and eliminate badly managed banks riddled with bad debts?

Probably negative because obviously the whole article is satire. My first read I got to #2 before I realised it was just a ficiton piece (except for the supermarket pricing).

A perfect example is #6. You won't last in business if you don't have some grasp of economics. "economists" however just make reports, they don't bet the company on getting it right.

And Peterpan... just because people post things you don't like doesn't mean they're nationalist bigots. In fact, assuming that people must be bigots because they disagree with a foreign, show bigotry and prejudice on your part.